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Bayer cuts plastics outlook, as higher costs hurt

A plant belonging to Germany's largest drugmaker Bayer is seen in Leverkusen January 30, 2013. REUTERS/Ina Fassbender
A plant belonging to Germany's largest drugmaker Bayer is seen in Leverkusen January 30, 2013. REUTERS/Ina Fassbender

FRANKFURT (Reuters) - Weak demand for Bayer's plastics and chemicals forced the diversified healthcare group to lower its outlook for its MaterialScience division, marring earnings gains at its farming pesticides unit.

First-quarter adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) edged 0.4 percent higher to 2.45 billion euros ($3.18 billion), which was slightly below the average estimate in a Reuters poll of 2.59 billion.

The shares were 1.6 percent lower in pre-market indications provided by brokerage Lang & Schwarz.

Core earnings at Bayer's MaterialScience unit, the world's largest maker of transparent plastics used in sports goggles, DVDs and car lights, slumped by more than a quarter.

The business lifted prices to respond to higher costs of petrochemical precursor materials, which depressed sales volumes. An expensive maintenance shutdown in North America further eroded profit.

Polycarbonates, the type of transparent plastic that is Bayer's specialty, are in ample global supply after lower-cost rivals in the Middle East, mainly Sabic, built new sites. Demand growth is only slowly chipping away at the supply overhang.

Bayer, which celebrates its 150th anniversary this year, cut the division's full-year outlook to stagnant adjusted EBITDA, where it had previously hoped for an increase.

The company, however, stuck by its group outlook for a medium single-digit percentage increase in adjusted EBITDA as new drugs such as its stroke prevention pill Xarelto are forecast to see a rapid uptake and amid strong demand for the crop chemical unit's herbicides and seed treatments.

($1 = 0.7695 euros)

(Reporting by Ludwig Burger)

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